core sector communique

Deloitte WA Index moves against the trend

19 September 2010

 

The market capitalisation of Western Australian (WA) listed companies which comprise the Deloitte WA Index increased by 2.5% to close at $152.0bn for the month of August 2010.

 

In a month when other major indices of the world weakened, the WA market bucked the trend, supported by strength in global commodity prices.

 

For August the Index rose by 3.6bn, continuing the strong growth of the last month of the financial year.

 

“This really is a remarkable performance in light of the lack of investor confidence that is plaguing the bank and financial markets,” commented Keith Jones, Managing Partner of Deloitte WA and recently appointed Head of Deloitte’s Australian Energy and Resources team.

 

The Nikkei led the slide, falling by 5.6% to a 16-month low in the month of August. Asian technology shares were especially downcast, with Intel warning of revenue being lower than forecasted, whilst the Japanese Yen hit a 15 year high. The US S&P 500 was not far behind, with a 4.8% decline as a result of reports on falling house prices, loan defaults and the impact of tighter regulations stemming from the new financial reform law. The negative reporting in the United States has also impacted global markets with the FTSE 100 and the All Ordinaries falling 2.7% and 1.5% respectively.

 

The Deloitte WA Index has sustained growth for the month of August, lead predominantly by miners such as Fortescue Metals Group Limited and Andean Resources Limited, with increases in market capitalisation of $1.1bn and $998m respectively. The materials and energy industries were supported by a general increase in the price of most major commodities, including copper (1.12%), iron ore (3.82%) and zinc (2.25%). Uranium was the biggest mover among commodities in August, ending the month 12.9% higher. Speculation that Chinese buyers had started to increase uranium exposure as the country develops its nuclear generated power ambitions helped drive the price higher, as did news that one of the world’s largest uranium producers, Cameco, had decided to restrict sales to the spot market.

 

The “Movers and Shakers” within the Deloitte WA Index for the month of August, were Tanami Gold NL, Exco Resources Limited and Matrix Composites & Engineering Limited, which experienced significant increases in market capitalisation of 160.0%, 75.1% and 61.7% respectively.

 

Tanami Gold NL announced the successful completion of its $63.7 million pro-rata renounceable entitlements issue, which will aim to accelerate the development and exploration at the recently acquired Central Tanami Gold Project as well as strengthen the company’s financial position by reducing external debt. The company has also seen favourable results from updated mineral resource estimates for its Western Tanami Gold Operations, announcing an increase of 31% to 554,700 ounces. As a result of these events, Tanami Gold achieved an increase in capitalisation of $108m, to close the month of August at $175m.

 

The market capitalisation of Exco Resources Limited finished at $161m for the month of August, representing an increase of $69m. A combination of positive June quarterly results and exploration updates contributed to this increase, with the performance of the White Dam Gold Project located in South Australia exceeding expectations. Gold production and sales also returned favourable results, assisted by an increase in the price of gold of 5.5% for the month of August. The company was also successful in raising $5m through the issue of 16m fully paid ordinary shares at 30 cents per share to Aus-Ore Investments Propriety Limited.

 

Matrix Composites & Engineering Limited’s market capitalisation increased by $119m in the month of August, closing at $313m. The release of Annual Results showed the company had exceeded prospectus profit forecasts by 139%, with total revenue up 89% on the forecasted amount to $102m. The operational highlights for the company included strong growth in the Composite Materials division as a result of margin improvements and new product development. Construction on stage 1 of the Henderson project has commenced with commissioning expected by Quarter 2 2011. The Henderson project will consolidate Matrix’s seven current locations into one at the Australian Marine Complex in Henderson, WA.